California regulator lays groundwork for PG&E bailout

1of3PG&E watch as trees are marked for cutting after the Camp Fire tore through the town of Paradise, California, on Wednesday, Nov. 14, 2018.Photo: Gabrielle Lurie / The Chronicle 2018

2of3Power transmission lines cross a street in Sonoma, Calif., on Monday, Oct. 15, 2018. Some customers in the region remain without power after PG&E cut electric service in hopes of preventing fires amid red flag fire warnings.Photo: Noah Berger, SFC

3of3The PG&E building is reflected on the front of the 50 Beale St. building seen on Thursday, Nov. 1, 2018, in San Francisco, Calif.Photo: Liz Hafalia / The Chronicle

Capping a wild day on Wall Street in which Pacific Gas and Electric Co. stock crashed and soared as investors weighed the prospect of government aid, California’s top utility regulator said Thursday his agency can help the utility avoid financial catastrophe because of the state’s raging wildfires.

Michael Picker, president of the California Public Utilities Commission, said his agency does not want PG&E and the state’s other investor-owned utilities to file for bankruptcy. In a move he conceded was unusual, he briefed investors and analysts on his views before issuing a public statement Thursday, a decision that may have contributed to the stock’s after-hours surge.

The commission, Picker said, will soon begin to implement a provision in a new state law through which utilities can pass wildfire costs along to their customers.

The provision in the law, SB901, lets utilities such as PG&E handle wildfire-related costs by using bonds customers would pay off over time. But the utility first needs to go through a bankruptcy stress test that determines how much of the cost it can absorb on its own — anything beyond that can be passed to customers.

In an interview with The Chronicle, Picker said he believes the process can apply to wildfires from this year and last year. But because the law currently authorizes the utility to issue bonds only for fires that ignited in 2017, Picker admitted some “cleanup legislation” may be necessary.

State fire investigators have not determined the cause of the deadly Camp Fire burning in the Sierra Nevada foothills east of Chico. PG&E told regulators last week, however, that some of its equipment near an origin point of the fire in Butte County experienced a problem just before the blaze began, helping fuel speculation and at least one lawsuit pinning blame on the utility.

Picker’s comments to The Chronicle and in a public statement came after Bloomberg reported he spoke on a call hosted by Wall Street analysts, in which he said he looked unfavorably on the prospect of PG&E going bankrupt.

The report appeared to boost the shares of the utility’s parent company, PG&E Corp. While PG&E shares were down more than 30 percent when the markets closed Thursday, bringing the company’s value down to $9 billion, they made a dramatic rebound in after-hours trading, climbing more than 44 percent and erasing the day’s losses.

The stock was trading after hours at $25.60, which is still nearly half its opening price Nov. 8, the day the Camp Fire began.

Picker said that allowing utilities to go bankrupt is “just not good policy.”

“They have to be financially healthy to be able to provide those goods and services that ratepayers need,” he said in an interview. “If they can’t borrow money, if they have liquidity problems and they can’t do vegetation management, that’s a problem. That’s not good policy, to really let them get financially unstable.”

PG&E spokeswoman Lynsey Paulo said in an email the utility agrees with Picker that “an essential component of providing safe electrical service is long-term financial stability.”

“Access to affordable capital is critical to carrying out safety measures and meeting California’s bold clean energy goals,” Paulo said in the email. “Recently passed legislation recognized the importance of financially healthy utilities to California electric customers, and implementing it quickly is important to achieve that goal.”

Picker also said the utilities commission will broaden the scope of a 3-year-old investigation into PG&E’s safety culture, originally borne out of the fallout from the 2010 San Bruno pipeline explosion, to include recent wildfires as well.

“This is really about the safety culture, not about San Bruno,” Picker said. “It’s what have they done subsequently? Have they done things that they know work, and did they monitor them and did they find that they are not meeting expectations on any particular actions? What did they learn from that to improve? So far, I would say not all the evidence supports the fact that they have a strong safety culture.”

It’s not clear what, if any, additional steps the Legislature will consider to help PG&E should investigators determine its equipment sparked the Camp Fire.

In response to Thursday’s public statement from Picker, state Sen. Bill Dodd, D-Napa, released a statement of his own saying lawmakers this year “put significant new requirements” on electric utilities and the commission.

“It’s my expectation that the public utilities commission will move quickly to institute these heightened standards,” Dodd, who wrote SB901, said in the statement. “It is important that the Safety Culture Investigation addresses the structure and internal controls of the utility.”

J.D. Morris is a business reporter covering energy, including PG&E, Tesla and California’s clean power initiatives.

Before joining The Chronicle, he was the Sonoma County government reporter for the Santa Rosa Press Democrat, where he was among the journalists awarded a Pulitzer Prize for their coverage of the 2017 North Bay wildfires.

He was previously the casino industry reporter for the Las Vegas Sun. Raised in Monterey County and Bakersfield, he has a bachelor’s degree in rhetoric from UC Berkeley.